Ford bails itself out
Well, not completely, but the Blue Oval boys have rid themselves of almost $10 billion worth of debt:
On March 4, 2009, Ford and Ford Credit announced the major components of a comprehensive debt restructuring: (1) a conversion offer in which Ford offered to pay a premium in cash to induce the holders of any and all of the $4.88 billion principal amount outstanding of its 4.25% Senior Convertible Notes due December 15, 2036 (the “Convertible Notes”) to convert the Convertible Notes into shares of Ford’s common stock (the “Conversion Offer”); (2) a $500 million cash tender offer by Ford Credit (the “Term Loan Offer”) for Ford’s senior secured term loan debt (the “Term Loan Debt”); and (3) a $1.3 billion cash tender offer (the “Notes Tender Offer”) by Ford Credit for certain of Ford’s unsecured, non-convertible debt securities (the “Notes”).
The second and third items are mostly bookkeeping items between Ford and Ford Credit, but the conversion offer paid off big: $4.3 billion worth of notes were redeemed, and at settlement Wednesday Ford will fork over 468 million shares of common stock (which went up by 16 percent Monday) plus about a third of a billion in cash.
The reduction of debt, $9.9 billion in all, will save the company about half a billion dollars in interest per year; at the end of 2008, Dearborn was $25.8 billion in the hole, so this is a decided improvement in their position.
And an attorney working on the project commented:
“It is refreshing to see a company doing something without the government, and not going to the government and waiting to be bailed out,” said Michael Kaplan, a Davis Polk & Wardwell lawyer who worked with Ford.
They’re not out of the woods yet, but it’s a start.
McGehee »
7 April 2009 · 1:49 pm
I worry though, that by not taking the bailout and keeping the devil’s grubby paws off the title to their soul, Ford may have bought itself a long-term competitive disadvantage when the other two become mostly-owned subsidiaries of Uncle Sam.